Economic Logic, Too

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I discuss recent research in Economics and various events from an economic perspective, as the name of the blog indicates. I plan on adding posts approximately every workday, with some exceptions, for example when I travel.

Tuesday, February 10, 2009

Over the past few days, I finally came around reading Michele Boldrin and David Levine's Against Intellectual Monopoly. I had read bits and pieces from the on-line version (still available) and followed their blog (see my blogroll in the sidebar), but reading it from cover to cover makes their case more convincing.

Essentially, the book challenges the conventional view that temporary monopolies like patents and copyrights are necessary for innovation. This is the mantra you hear everywhere: if there weren't patents on drugs, the pharmaceutical companies would never be able to recoup their investment in research, their stratospheric returns on investment notwithstanding. Or that without copyright, artists cannot make a living.

Boldrin and Levine show plenty of examples that demonstrate that it is possible to make an absolutely decent living without monopoly protection. For example, the early US book industry did not have copyright protection, yet publishers and authors were make more profits than in Britain, where protection pushed prices up and print runs down. US printers, however, flooded the market with cheap books and thus contributed to the increase in literacy.

This brings me to the fact that monopoly is rarely good for social welfare. The book goes through numerous instances where patents actually inhibit progress by preventing innovations based on a current patent. Also, they have been many example where an industry expanded greatly while it was free from patents, but once some big players started feeling threatened by new innovators, they pushed Congress to extend the coverage of patent laws, and innovation and expansion comes to a standstill.

This is a great book. I bought a copy, but you did not need to, as it is not copyrighted and available for free download. But I guess I contributed to demonstrate that you can make a buck without copyright, and the authors deserve to be rewarded.

For example, the early US book industry did not have copyright protection, yet publishers and authors were make more profits than in Britain, where protection pushed prices up and print runs down.

Hmmm...I haven't read the book but doesn't this example imply British book makers are walking past $5 bills on the pavement, and that the rewards for the publisher than is first to deviate from the British equilibrium would make an especially large return? Its too obvious a point for the authors to have missed, I think I shall look up what they have to say. Thanks for the link.

No, matt b, it does not say that. For a couple of reasons: - those reported to be earning more were the authors, not the publishers;- how does and individual publisher deviate from a copyright equilibrium? The British publishing industry was set up to operate under copyright and switching to a new mode would have been costly and also pretty risky (retaliations by other publishers being the first thing one can think of).

I just took a look at Chapter V of this book, just to see if this is a case of somebody presenting a well-researched argument or an economist spouting off about something they know nothing about (and economists do that more often than most people would think - I once saw an economist at a conference proudly present a model for revenge that flew in the face of the whole of human history). I'm afraid that when it comes to the matter of books, it was downright dishonest in places.

This is propaganda.

Some examples:

Page 111-112 - the authors ask the question of how well the American copyright extensions have worked, and judge it solely on number of works created. Then, they declare that it didn't help, because there isn't a massive increase. They DON'T mention that there wasn't a decrease either - in fact, there is a very slow increase. They also don't look at works that were not properly registered. Even more telling, they don't look at other factors - whether the quality of life of the authors was impacted positively or negatively, whether there were enough publishers to provide an increase in publications, etc. They base their conclusion on a single metric.

Page 115 - A clear case of apples and oranges. Having talked about the reasons given for the CTEA (without, I might add, actually examining them in any detail), they comment that 8 years later, the same corporations are trying to get the European copyrights extended from 50 years to 95 years to keep up with the United States, implying that these companies are essentially raising one, then using it as an excuse to raise another. Which would be evil, except that it's not what's happening - the CTEA involved books, and the recent lobbying is about music, which have entirely different copyright terms. So, it would be more accurate to say that having harmonized one section of the creative arts, they're attempting to harmonize another - which is far less evil.

Page 115-116 - Here the argument turns absolutely dishonest. The authors want to demonstrate that books out of copyright are more available than books in copyright. So, here is what they do - they take Edgar Rice Burroughs, and compare the books that are in copyright to the ones that are out of copyright, and show that indeed, the ones in copyright have fewer editions available. This is a trick, though - Edgar Rice Burroughs is one of the most famous writers of his day. Conspicuously, they don't provide any data for number of books published in total that are out of copyright compared to availability - they just take the case of a single, famous author, and extend that to be the case for the whole. If they extended it, it's fairly certain that they'd find that the majority of books that have entered the public domain are no longer available in print or online, undermining their argument. Most people would not claim that the exception is the rule, but they have made precisely that claim.

Pages 117-118 - The authors now demonstrate a complete lack of understanding of how the book market works, as they claim that having classic spy novels in print would devalue new spy novels. To channel Morbo from Futurama, "Publishers do not work that way!" In fact, the decision of whether a book gets published or not is entirely based on how well it is likely to sell, and having a classic spy novel that is consistently selling well is more likely to reinforce the sales of new ones, not devalue them.

These are selected errors, both factual and methodological. It would be nice if there was actual research here, rather than taking a few surface facts and drawing ignorant conclusions.

Wasn't that the same single metric that was used to justify copyright protection to begin with?

>the CTEA involved books, and the recent lobbying is about music,

This is not true, the CTEA also covered music, dramatic works etc.

>it's fairly certain that they'd find that the majority of books that have entered the public domain are no longer available in print or online

You don't present any evidence for this, and even if it's true putting books online as they came out would, in the absence of copyright, be trivial today. Putting old books online takes time and effort, although it's proven that some people are willing to make that effort.

>Most people would not claim that the exception is the rule, but they have made precisely that claim.

Surely it's the good books people are most interested in republishing? Are you suggesting that the copyright holders of a book will publish it simply because it's in copyright, even if nobody wants to read it?

>having a classic spy novel that is consistently selling well is more likely to reinforce the sales of new ones, not devalue them.

Insofar as the two books compete for the same demand - the money and more importantly, time that people are willing to spend on them - it seems inconceivable that they could not devalue one another.

Can they reinforce interest in one another? Yes, absolutely, but they also compete, which seems to be all the authors are saying.

All you've done is poke holes in their argument, not address their actual points. I think the most suspect area of their analysis is the handwavy 'the market will provide' attitude to what people will do without copyright protection.

Musicians will be fine, they can make money by touring, but what about people who make videogames? Will they be forced to make all games use a client/server model to prevent piracy?

I find having to observe copyright a small price to pay to actually own the things I pay for, if the alternative is an elaborate rental system.